Language Selection

English French German Italian Portuguese Spanish

Visa to Bar Transactions by Processor

Filed under
Security

Visa USA said yesterday that it would stop allowing the payment processor CardSystems Solutions to handle its transactions, months after the processor left the records of millions of cardholders at risk for fraud.

"CardSystems has not corrected, and cannot at this point correct, the failure to provide proper data security for those accounts," said Tim Murphy, Visa's senior vice president for operations in a memorandum sent to several banks. "Visa USA has decided that CardSystems should not continue to participate as an agent in the Visa system."

Cardholders and merchants should not be affected by the change.

Visa said its decision to remove CardSystems came after a review and an independent investigation found that the payment processor had improperly stored cardholder data and did not have the proper controls in place.

It is unclear if MasterCard and American Express will take similar action, but with Visa accounting for more than half of all card transactions, the move raises questions about the future of CardSystems.

"I've never heard of them booting off a processor," said Avivah Litan, a security analyst at Gartner Inc., a technology research group. "The worst thing that I've heard is a processor that had to cough up $1 million."

The move came at least two months after Visa first learned that data had been compromised and just days before its executives, along with those of other major card companies, have been called to testify in Washington about their security practices. The chief executive of CardSystems, John M. Perry, is also expected to testify on Thursday.

In a statement released yesterday, CardSystems said Visa's decision was unexpected and upsetting. "We are disappointed and very surprised that Visa has decided to take this action today, not only because of the impact that it will have on our employees, but the disruption that it will cause to our 110,000 merchant customers," the processor said in a statement. "We hope that Visa will reconsider."

Visa has given at least 11 banks, which hired CardSystems to handle the merchant transactions, until the end of October to change processors, the memo said. Until then, CardSystems will be allowed to process Visa transactions as long as it has corrected any problems and allows a Visa-affiliated monitor on site to oversee its operations in Tucson. CardSystems is also banned from handling Visa transactions from its international affiliates or any new merchants, processors or member banks in the United States.

Visa had been weighing the decision for a few weeks but as recently as mid-June said that it was working with CardSystems to correct the problem. CardSystems hired an outside security assessor this month to review its policies and practices, and it promised to make any necessary upgrades by the end of August. CardSystems, in its statement yesterday, said the company's executives had been "in almost daily contact" with Visa since the problems were discovered in May.

Visa, however, said that despite "some remediation efforts" since the incident was reported, the actions by CardSystems were not enough.

"Visa cannot overlook the significant harm the data compromise and CardSystems' failure to maintain the required security protections has had on member financial institutions and merchants as well as the significant concerns it raised for cardholders," the company said in a statement.

At this point, it is unclear what the other branded card companies will do. MasterCard has previously said that it was giving CardSystems a "limited amount of time to demonstrate compliance with MasterCard security requirements" but never laid out a specific timetable.

Sharon Gamsin, a MasterCard spokeswoman, did not return calls seeking comment. Judy Tenzer, an American Express spokeswoman, said the company did not comment about its relationships with vendors. Leslie Sutton, a Discover Financial spokeswoman, could not offer an immediate response.
Visa's decision is the latest development since the disclosure in mid-June that the CardSystems computer network had been compromised, putting the cardholder names, account numbers and security codes of as many as 40 million credit and debit cardholders at risk for fraud. The information of about 22 million Visa cardholders was exposed; MasterCard reported the data of 14 million of its cardholders was potentially at risk; and the rest largely belonged to customers of American Express and Discover.

At the time, Mr. Perry of CardSystems acknowledged that the company had been improperly storing data, violating Visa and MasterCard security rules. He said data thieves directly obtained information related to some 200,000 cardholder accounts. The F.B.I and a group of federal banking regulators are now investigating.
In its statement, Visa offered its most scathing indictment of those security violations to date. The chief executive of CardSystem had "stated that the company knowingly retained unmasked magnetic stripe cardholder data, purportedly for 'research purposes,' " Visa said. "Visa's security requirements were adopted precisely for the purpose of protecting cardholder information and guarding against the type of data compromise recently experienced by CardSystems."

In the letter Visa sent to the banks, Mr. Murphy suggested that the data breach occurred as early as August 2004.

By ERIC DASH
The New York Times.

More in Tux Machines

FLOSSophobia

I have seen it many times. "Linux is a cancer". "Open sauce". "Linuxtard". I even remember the teacher who did not bring a laptop for her presentation and, when I offered her my Linux netbook, she rejected it as if I had presented her something illegal. She tried to use an old Windows computer instead but, when the computer failed, she ended up displaying her presentation with my Linux netbook. Clearly, this teacher's position was not based on ignorance or lack of expertise because she knew Linux existed and all she had to do was to display slides. Her refusal was due to indoctrination: she had learned that Linux and non-Microsoft office suites had to be rejected. Read more

Today in Techrights

Hands on With elementary OS Powered Centurion Nano Laptop by Alpha Store

If you want to buy a new laptop, no doubt you should consider the Centurion line. It will be a good choice for you, Linux aficionado. As well as for your Windows-addicted husband/wife/employees. The Centurion Nano is certainly not a “gamer” laptop. However, besides that particular use case, and for an interesting price, you will get a very competent computer, 100% compatible with Linux and usable for a broad range of tasks. Read more

Tryton and Python Deprecation Warnings

  • Trying Tryton
    The quest to find a free-software replacement for the QuickBooks accounting tool continues. In this episode, your editor does his best to put Tryton through its paces. Running Tryton proved to be a trying experience, though; this would not appear to be the accounting tool we are searching for. Tryton is a Python 3 application distributed under the GPLv3 license. Its home page mentions that it is based on PostgreSQL, but there is support for MySQL and SQLite as well. Tryton, it is said, is "a three-tier high-level general purpose application platform" that is "the core base of a complete business solution providing modularity, scalability and security". The "core base" part of that claim is relevant: Tryton may well be a solid base for the creation of a small-business accounting system, but it is not, out of the box, such a system itself.
  • Who should see Python deprecation warnings?
    As all Python developers discover sooner or later, Python is a rapidly evolving language whose community occasionally makes changes that can break existing programs. The switch to Python 3 is the most prominent example, but minor releases can include significant changes as well. The CPython interpreter can emit warnings for upcoming incompatible changes, giving developers time to prepare their code, but those warnings are suppressed and invisible by default. Work is afoot to make them visible, but doing so is not as straightforward as it might seem. In early November, one sub-thread of a big discussion on preparing for the Python 3.7 release focused on the await and async identifiers. They will become keywords in 3.7, meaning that any code using those names for any other purpose will break. Nick Coghlan observed that Python 3.6 does not warn about the use of those names, calling it "a fairly major oversight/bug". In truth, though, Python 3.6 does emit warnings in that case — but users rarely see them.